As this blog previously reported, in the next few days, there will be an important change in the federal tax law that could impact thousands of divorces happening or about to happen in the Dayton, Ohio area.
To review, for all alimony, also called spousal support, orders that get finalized on or after January 1, the alimony payments will not be tax deductible to the one paying the alimony. Likewise, the person receiving the alimony will not have to account for it as income on his or her taxes.
According to at least one report circulated by an Ohio media outlet, the change is going to make divorce more contentious. The reason that it could add some acrimony into the divorce process is that it will take a valuable negotiation tool off of the table.
To explain, one can consider someone who makes a lot more income than his or her spouse. During the divorce process, instead of haggling over property, that person might agree instead to make a large, even larger than expected, alimony payment to his or her spouse.
Not only would that payment serve to reduce that person's overall tax base, it may in the right case even get a person the benefit of a lower marginal tax bracket, meaning for at least some of his or her income, he or she pays less on the dollar. On the other hand, the other spouse gets a generous alimony payment while having to pay a relatively modest amount of taxes on it.
Now, with this win-win scenario off the table, more people may be forced into either going to court or arguing intensely about property, and alimony, during the divorce process. This may require legal representation.